September 8, 2021

“The dollar peaked near a one-week high on Wednesday against major peers, buoyed by higher Treasury yields and a weaker euro ahead of the European Central Bank’s next policy meeting. A weaker euro is likely to be the result of a short stint of caution, as a reduction in the pace of pandemic bond purchases, if announced by the ECB on Thursday, could see the euro rise again.”

Tim Hallinan, Trading Director

Main Headlines

President Biden has requested $30 billion from Congress to support spending siphoned towards disaster aid and resettling Afghan refugees. The request for additional federal money came on Tuesday from White House acting budget director, Shalanda Young, following the President’s remarks that the world was in “peril” after touring areas of New York and New Jersey which were hit with extreme flash floods in recent weeks. Precisely $10bn was requested in aid to support the country’s recovery from Hurricane Ida, a further $14bn would be needed to manage further extreme weather events, whilst $6.4bn was earmarked to support the resettlement of Afghan refugees.

Boris Johnson’s changes to National Insurance to fund health and care lifts the UK tax burden to a 70-year high. On Wednesday, the Prime Minister will challenge rebel Tory MPs who plan to vote down his manifesto-breaking £12bn tax-raising plan to raise funds for health and social care as he raised Britain’s tax burden to its highest point since 1950. Johnson will ask Conservative MPs to support a strategy of higher taxation more often associated with the Labour Party, undermining that the Conservatives as the party of low tax. Johnson’s response to this charge is that his party is “the party of the NHS” in the present day.

GBP

Sterling is lower against the dollar and the euro overnight. Scotland’s First Minister, Nicola Sturgeon has announced that her government will draw up a detailed prospectus for Scottish independence but did not announce a date for passing legislation which would pave the way towards a second referendum on leaving the United Kingdom. The UK has been accused of undermining its global leadership on climate change if it opens the first deep coal mine in decades in the country at Woodhouse Colliery. Environmental campaigners have vocally opposed the project in an effort to embarrass the UK government ahead of the COP26 Summit in Glasgow in November.

EUR

The euro is higher against sterling but lower against the dollar in early morning trade. The European Commission is increasing pressure on Warsaw and its Law and Justice Party (PiS) by ordering the ECJ to impose daily fines on Poland for backsliding on the rule of law. The EU could go further stripping Poland of its voting rights as an EU Member State or withholding EU funding for regions passing anti-LGBTQ+ resolutions. Angela Merkel used one of her final appearances in Parliament to urge voters to back her CDU successor, Armin Laschet to prevent the Social Democrats and the Greens forming a left-leaning government in Germany with Die Linke or The Left, a socialist party comprised by a motley crew of East German political ideologies.

USD

The dollar is well-bid against most major currencies overnight. The Biden Administration’s plans to administer booster shots of the Covid-19 vaccine in September have been mired in a confusion of regulatory approvals, eligibility, logistics and funding concerns. Two weeks remain until the rollout of third booster shots are due to be rolled out, yet uncertainty over timing and implementation of the programme could cause delays. The University of Michigan and US Labor Department have made initial forecasts that the US economy could slow down in September, despite expectations that this month would see an uptick in consumer spending and a decline in labour shortages.

Markets

Asian stocks Wednesday snapped an eight-day winning streak as a rally in Japan moderated and traders evaluated the risk of a slower recovery from the pandemic due to the delta virus variant. Shares fell in Hong Kong and fluctuated in China, where the mouthpiece of China’s Communist Party ran an editorial seeking to ease concern that President Xi Jinping’s regulatory crackdown will hurt foreign investors. Equities climbed modestly in Japan, supported by hopes for economic stimulus from the next prime minister. U.S. and European stock futures were steady. A selloff across bond markets has intensified in part due to a flood of debt sales. The 10-year U.S. Treasury yield remained around 1.37%. Australian and New Zealand yields climbed. The dollar ticked higher.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany July trade balance

8:45 a.m.: France July trade balance

9:30 a.m.: Sweden July industrial orders

10:00 a.m.: Italy July retail sales

10:30 a.m.: Denmark to sell bills

11:00 a.m.: Norway, Sweden sell bonds

11:00 a.m.: U.K. to sell linkers

11:15 a.m.: Switzerland to sell bonds

1:00 p.m.: Russia to sell bonds

5:00 p.m.: BOE’s Bailey, Broadbent, Ramsden, Tenreyro and Hall Speak

6:00 p.m.: Russia August CPI

EIA releases Short-Term Energy Outlook

Corporate Events

Earnings include Lululemon Athletica, Copart, SentinelOne, GameStop, New Amsterdam Invest, Somfy, BKW, OPAP, InPost

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